As the world emerges from the depths of the pandemic Australia appears to have once again lived up to its ‘lucky country’ moniker, according to Viriathus Capital’s Shaun Cartwright.

Quick and significant policies were rolled out to protect the country’s 25.5 million inhabitants, while easy-flowing stimulus was made available to those that need it – keeping the economy ticking over.

Not only did the unprecedented scale and scope of this support carry a beleaguered Australia through the crisis, but Mr Cartwrtight noted each of the new challenges now dawning on the horizon appear to have ready-made solutions already in place.

Mr Cartwright pointed to the looming end of JobKeeper support payments – which put an estimated $101 billion into the hands of workers through fortnightly payments – as a prime example.

Although Treasury has noted the end of the program will lead to some job losses, Mr Cartwright said changes to responsible lending legislation will offset the broader economic impacts by making it easier for Australians to access credit.

“The easing will mean it’s easier for people to obtain credit again,” he said.

“With JobKeeper ending, people are going to have access to cheap credit and historically low interest rates. To me that looks like a perfect opportunity; people will look to invest in the stock market.”

This ongoing policy support should lead to a strong year ahead for markets, Mr Cartwright said.

Three companies positioned to benefit

Speaking on Reach Markets’ fortnightly ‘Meet the Fund Manager’ webcast, Mr Cartwright said he prefers looking to smaller cap stocks when investing because there’s less analyst coverage – meaning more mispriced opportunities.

“When you look at some of the bigger cap stocks, at the mega-caps, there’s so much liquidity and so much analyst coverage, everyone’s kind of aware of them,” he said.

“We’ve all heard of the Commonwealth Bank, BHP, CSL etc. The mis-pricing opportunities with some of those stocks can be difficult.”

Here are three of the smaller cap businesses he believes have the potential to shine in 2021.

Engage:BDR Limited (ASX: EN1)

The first business Mr Cartwright flagged is Engage:BDR Limited, which provides high-performance marketing solutions for brands, agencies, and platforms.

Mr Cartwright noted, however, that not everyone fully grasps what this means or the size of the opportunity it represents.

“This is one of the most misunderstood stocks on the ASX,” he said.

The company – which was created by one of MySpace’s original staffers and counts the now-defunct social media giant’s founder as a board member – auctions ad-space on websites, social media, and more recently, connected TV.

Click here to watch Shaun’s insights on Engage:BDR Limited.

Prospect Resources (ASX: PSC)

Lithium is selling close to two-year highs at the moment as producers warn of possible shortfalls in supply (despite analysts in 2019 wrongly predicting markets would be oversaturated by 2021), and Mr Cartwright believes companies with exposure to the metal are well-positioned to benefit.

“If you can produce it, you can sell it,” he said.

Prospect Resources is one company Mr Cartwright likes under these market conditions.

The business is close to going into production, and although its resources are in hard rock deposits (which traditionally increases the cost of extraction over mines with brine deposits), Prospect’s extraction process also produces petalite.

This clear mineral is used in the production glass and ceramics, and Prospect have already signed off-take agreements with buyers which will off-set the cost of lithium production and place the company in the cheapest 10% of lithium producers globally.

Click here to watch Shaun’s insights on Prospect Resources.

HeraMED (ASX: HMD)

HeraMED is a company Mr Cartwright “only identified recently”, which sits in the burgeoning telehealth sector.

The company produces devices (which now have FDA approval) that allow pregnant women to monitor the health of their unborn children from home.

“This is really cool, and it’s incredibly revolutionary,” Mr Cartwright said.

“This product here will allow pregnant mothers and their partners to monitor their fetus continuously and – through a phone app – any time there are any irregularities it can get in touch with a doctor.”

With the maternal health market worth USD $111 billion in the USA alone, Mr Cartwright said this product (which can be sold globally) has immense upside potential.

Click here to watch Shaun’s insights on HeraMED.

This article is a summary of the information Mr Cartwright shared with us during our fortnightly ‘The Insider: Meet the Fund Manager’ session. You can watch a recording of the session below, or you can click here to book into our next installment of the series.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

Sources:

• PETALITE: CHARACTERISTICS & MARKET
• New figures reveal daunting toll the conclusion of JobKeeper will take